42

p Nazi Germany’s treacherous attack put an end to the period of the peaceful economic progress in the Soviet Union, which was plunged into the most destructive and tragic war the world had ever known. The Second World War far outdid World War I in scale of operations, in human participation and in the resources involved. And for the four final years, the Soviet-German front was the war’s chief theatre of operations.

p The scale of the Soviet war economy far exceeded that of tsarist Russia in the first war (see Table 8). In the 1941-45 period, by comparison with 1914-17, the Soviet Union manufactured 29 times more artillery pieces, 89 times more mortars, 78 times more machine-guns, 6.9 and 6.4 times more cartridges and rifles, respectively. Growth in the Soviet wareconomy potential to the extent of its ability to withstand 43 and repulse the nazi onslaught was a vital consequence of the pre-war industrialisation policy.

When Germany attacked and in the early stages of the war, the Soviet economy compared unfavourably both in volume of military production and in preparedness with that of Germany, which had been reinforced by resources from the occupied territories. Soviet industry had been geared to peaceful development and was not switched in time to mass production of the latest military hardware. Inevitably, the Soviet Union was to suffer for this in the initial period of hostilities. By early 1943, however, Germany had lost her superiority in both the quality and quantity of combat equipment. The Soviet army was now receiving sufficient quantities of modern tanks, planes, anti-tank and antiaircraft artillery, automatic weapons, etc. The Communist Party and the Soviet Government, relying on the potential created by the Soviet system and the socialist economy, mobilised the country’s resources for victory. In a short time, the country’s economy was completely reoriented to a total war effort.

Table 8 Production of Military Hardware* U.S.S.R. Tsarist Russia Tanks, armoured and selfpropelled vehicles .... 30,000 insignificant Planes . . . 40,000 Artillery pieces ...... 120,000 3,900 Machine-guns 450,000 5,800 Shells, bombs and mines . . 240,000,000 16,300,000 * Average annual production for the three final years of the First and Second World wars. Sources: Y. Y. Chadayev, The Economy of the U.S.S.R., 1941-1945, Moscow, 1965. p. 211 (Russ. ed.); G. I. Shigalin, The National Economy oi the U.S.S.R.During the Great Patriotic War, Moscow, 1960, p. 115 (Russ. ed.).

p Despite its much smaller industrial base, in comparison with Germany or the U.S.A., the Soviet Union turned out, on annual average, more tanks, self-propelled vehicles, artillery pieces and mortars than either of these nations; in 44 planes, it was second only to the U.S.A. This was a triumph for the Soviet war economy and the Soviet socialist system. The American writer, Max Werner, had this to say:

p “All available Russian resources were more strongly concentrated on the war effort, and utilised to a greater degree than the German. Germany had more steel, but in Russia more steel out of every thousand tons was used for arms production than in Germany. Germany had more machinery, but in the Soviet Union a large proportion of all available lathes turned out war materiel. That is why the dramatic struggle of Magnitogorsk against the industries of the Hitlerdominated European continent was possible."  [44•1 

p To put the Soviet war achievement in true perspective, one must understand the terrible price that Soviet people paid for victory. On the way to V-Day—and without the successful Soviet war effort the Allied victory would have been inconceivable—the Soviet Union suffered shattering losses: as many as 20 million Soviet people lost their lives; the material loss in state and civilian property amounted to the staggering figure of 679,000 million rubles (in 1941 prices). Some 32,000 industrial plants that had previously employed 4 million workers were completely destroyed. The war destroyed 60 per cent of the capacity of steel foundries and of coal production, 65,000 kilometres of railways; 1,710 cities and over 70,000 villages were razed to the ground; 98,000 collective farms, 1,876 state farms and 2,890 machineand-tractor stations were plundered; many millions of head of cattle, pigs and horses were either slaughtered or sent to Germany. Apart from the direct losses suffered—the destruction of approximately one-third of the national wealth— the Soviet nation bore considerable losses from the lower national income that resulted from the cancellation and reduction of work at many industrial and agricultural enterprises and the overall slowdown of economic growth.

p The production of steel, oil, cement and all the basic consumer goods had to be drastically curtailed. By 1945, for example, steel output was down to two-thirds of the 1940 figure, oil production to 62 per cent, cement to about one-third, and the production of consumer goods was more than halved. The standard of living fell victim to the great 45 war effort: putting the economy on a war footing, spending huge sums on defence and the vast ruin in the occupied territories. Housing and the municipal economy were hardest hit and took longest to recover. As a result, some 25 million people were rendered homeless. Consequently, the war not only deprived the Soviet Union of normal economic development but destroyed much of what had been created before the war at such self-sacrificing effort.

p Unlike the Soviet Union, the United States substantially gained economically from the Second World War, as it had from the First World War. Its material losses were slight and it benefited from the booming war market that strongly stimulated U.S. industry. Nothing is more indicative of the war-time U.S. industrial upsurge than its increased electric power output. Between 1939 and 1945, U.S. electric stations increased their generation of electric power by 1.7 times.

p The U.S. iron and steel industry found the war a considerable boon: capital investment in the ferrous metal industry for 1940-45 amounted to $2,500 million (half of it in government funds). In 1939, only 138 of the 236 blast furnaces were in commission; by 1945, all were working to full capacity. During this period, pig-iron output increased from 51 million to 61 million tons. Production capacities for smelting alloyed steels increased 3.5-4-fold, and those for aluminium 7-fold. The machine-tool industry, whose total output was valued at only $200 million in 1939, improved to $1,321 million by 1942. In chemicals, output of a whole range of important products also grew severalfold during the war.

p While the U.S.S.R. was bearing the brunt of the nazi offensive and suffering huge losses, the U.S.A. was making a good profit from the war, setting itself up as a near- monopoly supplier of many vital commodities. All the same, the unproductive nature of arms manufacture had an inhibiting effect on some branches of U.S. economic life. So, for the five years from 1940 to 1945 national reproduction of wealth (in fixed prices) virtually marked time, while the value of buildings and other facilities, especially in urban areas, fell by 4.2 per cent. Similarly, spending on the health service—a vital sector for servicing the reproduction of labour resources —also fell. The proportion of health expenditure in the national product diminished by 8 per cent at the same time 46 as the cost of medical services climbed by 15 per cent. Furthermore, U.S. industrial growth, being geared to military requirements, was of a temporary nature; this inevitably engendered economic difficulties when it came to switching the economy on a peace-time footing.

p Even before the war’s end, the Soviet Government had begun to implement a plan for economic rehabilitation, whose most important feature distinguishing it from the process in Western Europe was that it was based on domestic resources, despite the extremely heavy war damage. Concurrently with its own rebuilding, the Soviet Union was rendering considerable economic -assistance to the other European states that were now building socialism.

p Because financial and other material resources for capital construction were naturally limited in the immediate postwar years, basic resources went to the key economic sectors— heavy industry and the railways—which had priority in equipment, raw materials, fuel components and labour. In the early post-war years, it was impossible to tackle some problems in agriculture, housing and the consumer goods industry. The pre-war consumption level was reached by the early 1950s.

The implementation of the plan for economic rehabilitation and further development ensured a mighty upsurge in Soviet material production, whereas in the U.S.A. the shrinking of the war-time markets caused the usual difficulties and growth rates at once dropped (see Table 9).

Table 9 Economic Growth Rates: U.S.S.R. and U.S.A. U.S.S.R. U.S.A. National income Average annual growth 1941-45 ...... __ 32 9.8 1946-50 14.6 insignificant Industrial production Average annual growth 1941-45 ...... —1.7 9.9 1946-50 ...... 13.6 1.2 Source; The Economy of the U.S.S.R., 1959, Moscow. 1960, pp. 77, 141 (Russ. ed.). 47

p In the immediate post-war five-year plan period, the Soviet economy began to recover at a high rate of growth, whereas in the U.S.A. the buoyant economy of wartime gave way to the slow economic development of peace-time. Employment declined and the number of jobless rose from its war-time low of 670,000 to 1,040,000 in 1945, 2,270,000 in 1946 and 3,142,000 in 1950. By 1950, U.S. war-time production figures had still to be attained: the industrial index stood at 133 in 1943, 130 in 1944, and only 113 in 1950 (1947-49= 100).

Meanwhile, the Soviet Union had completed its economic rehabilitation and was moving ahead. Many thousands of large and medium-size industrial plants were restored and built anew from 1946 to 1950. The country had already surpassed its pre-war industrial output level in 1948, i.e., long before the West European countries did so, despite the latter’s receipt of large U.S. subsidies. By 1950, Soviet industry was turning out considerably more than it had done before the war. In fact, but for the war, the Soviet Union would have been much closer to U.S. production levels in the main industrial products by 1955 (see Table 10).

Table 10 Industrial production: U.S.S.R. and U.S.A. Unit Soviet output U.S. 1955 output 1940 1955 Probable 1955 output but for the war Coal * mln. tons 166 31 18 6 48 391 71 45 22 170 5GO 125 75 40 250 421 330 106 51 629 Oil Steel ...... ” Cement ” ” Electricity ** 1,000 mln. kwh

p * Physical.

** Total generated.

Calculated from: The Economy of the U.S.S.R., 1956, Moscow, 1957, pp. GO-63 (Russ. ed.); The Economy of the U.S.S.R.. 1959, Moscow, 1960, pp. 156-58 (Russ. ed.); The Economy of the Capitalist Countries After the Second World War, Moscow, 1959, pp. 928-31 (Russ. ed.); estimation of probable industrial output from The Soviet Socialist Economy, 1911-1957, Moscow, 1957, p. 212 (Russ. ed.). 48

The U.S S.R. maintained its rapid economic progress and by 1958 national income was 3.8 times the 1940 figure, and 2.3 times the 1950 figure. Between 1951 and 1958, national income grew at an average of 13.5 per cent a year. In 1958, gross industrial output was 4.3 times the 1940 figure, and 2.5 times the 1950 figure. The industrial gap between the U.S.S.R. and the U.S.A. had considerably narrowed, largely due to the much faster growth in the major Soviet industrial sectors (see Tables 11 and 12).

Table 11 Industrial Production: U.S.S.R. and U.S.A. Unit Actual output in 1958 Soviet output as percentage of U.S. output U.S.S.R. U.S.A. 1950 1958 Coal * ....... mln. tons 425 382 44 111 Oil . . » » 113 331 14 34 Steel „ „ 55 77 31 71 Cement ...... „ 33 52 26 60 Sulphuric acid . . . „ 4.8 15 18 32 Electricity ** . . . 1,000 mln. kwh 219 724 22 32 Cotton fabrics . . . 1,000 mln. sq m 4.7 8.8 33 54 * In terms of hard coal. ** Mains feed. Sources; The Soviet Achievement of iO Years in Figures, Moscow, 1957i pp. fil-62 (Russ. ed.); The Economy of tlie U.S.S.R., 19S8, Moscow, 1959, p. 120 (Russ. ed.); The Economy nl the U.S.S.R., 19S9, Moscow, 1960, pp. 156-59 (Russ. ed.); The Economy of the Capitalist Countries Alter the Second World War, pp. 928-2’J.

p Soviet industry was growing much faster despite a much less favourable sectoral structure. U.S. industry had largescale iron and steel facilities that were not being used to the full. The Soviet Union had rapidly to build up its iron and steel industry, which is highly capital-intensive and has a lengthy gestation period. While the U.S.A. made scarcely any progress in its fuel industry, particularly in coal mining, the Soviet Union more than doubled output in this very capital-intensive industry between 1951 and 1958. The U.S.A. had no need to accelerate production in engineering, while the U.S.S.R. trebled production in that period. During these 49 Table 12 Industrial Output: U.S.S.R. and U.S.A. (1958 as a percentage of 1950) U.S.S.R. U.S.A. All industry .......... 249 125 Electricity . ... 258 186 Fuel 210 118 Ferrous and non-ferrous metals . . Chemicals ........... 230 320 88 163 Engineering and metal-working . . Textiles ............ 323 208 135 99 Food .............. 204 119 Source: The Economy of the U.S.S.R., 106i, p. 94. years, the U.S.A. concentrated on building up its chemical and power industries. The Soviet Union, besides promoting these highly effective industries, also poured men, money and materials into other sectors of the economy which took time to develop. Consequently, the higher industrial growth rate in the Soviet Union was attained on a less favourable material base and in the face of more substantial difficulties.

p After the war, the world socialist system grew in area and strength and this undoubtedly helped the Soviet Union to overcome some of its economic difficulties. Division of labour between socialist nations, economic co-operation and the sharing of scientific and technical expertise all played their part. In 1958, trade with its socialist partners amounted to 74 per cent of total Soviet foreign trade. It supplied them with the equipment and raw materials they needed and imported diverse machinery and tools from the industrially advanced socialist countries. It was able to take advantage of their accumulated technical experience, so that, together, the socialist nations were able to solve their technical problems by pooling resources.

p Nor was agriculture neglected. By 1949, having healed the severe wounds of war, Soviet farmers were almost back at their 1940 level. In the years that followed they received 50 much modern machinery which, together with the largescale reclamation of virgin and waste lands, enabled them to raise their total output to a level approaching that in the U.S.A.

p The Soviet Union was now catching up with the U.S.A. through its superior rate of growth, capital accumulation and labour productivity. And with the fulfilment of the Seven-Year Plan (1959-65), the social product and national income balance between the two countries tilted in favour of the Soviet Union in several key sectors. In 1957, the Soviet gross social product and national income were 50 per cent of the U.S. figures; in 1967, they had risen to 63 per cent. Per head, the Soviet social product and national income had risen from 42 per cent to 52 per cent of the U.S. levels. In 1967, Soviet industrial output was more than two-thirds of the American total.

In 1957 the Soviet Union had already caught up with and even outstripped the U.S.A. in several key industrial lines, as the table below indicates.

Table 13 Industrial Production: U.S.S.R. and U.S.A. J967 c utput Soviet out- Unit U.S.S.R. U.S.A. put as percentage of U.S. output in 1967 Goal * .... Oil mln. tons 595 288 511 435 116 66 Steel . . . . ,. 102.2 118 90 Cement .... ,. >. 84.8 67 127 Sulphuric acid Mineral “ ” 9.7 27 36 fertilisers „ 40.1 62.4 64 Electricity** Cotton fabrics 1,000 mln.kwh 1,000 mln. 589 6.4 1,384 8.4 43 77 Leather footwear sq m mln. pairs 561 615 91 * Output. ** Gross output. Source: The U.S.S.R. in Figures. 1967, Moscow, 1908, pp. (Russ. ed.). 51

p In the economic competition with capitalism, the Soviet people have brought a new approach to a whole range of practical problems that have vital importance for all countries embarking on the path of accelerated economic development and progressive social transformation of society.

p At every stage of development, fast economic growth was ensured by expanding the sources of national-economic accumulation. This was made possible because first, all exploiting classes had been swept away, and with them had gone the colossal non-productive expenditure on their upkeep and the appropriation and repatriation by foreign capitalists of the national wealth; second, employment in material production was growing rapidly; and third, productivity of social labour was growing fast through the introduction of up-to-date hardware.

p The first and second factors were foremost in promoting capital accumulation during the initial stages of Soviet growth. But once the economy could rely on the sound material and technical basis of socialism, with its accompanying advanced industry, power and transport, it was labour productivity that became the key factor. Since the last war, rapidly increasing productivity has made it possible to augment capital accumulation while raising the standard of living.

p For many years, the U.S.S.R. has kept well ahead of the U.S.A. in labour productivity growth rate (see Table 14). From 1940 to 1950, it increased 2.1 times faster than in the U.S.A., from 1950 to 1960, 3 times, and from 1955 to 1965, almost 2.2 times. The relative reduction in recent years in the gap between rates of productivity growth in the two countries is due to the fact that different factors bear on productivity at different economic growth periods. In particular, higher labour productivity during the period of socialist industrialisation stemmed from the large-scale changeover from antiquated forms of small-commodity production to large-scale socialist industrial production. Another reason is that industrialisation was accompanied by a radical change in the structure of the economy: employment in lowproductivity sectors—agriculture and the handicrafts— declined in favour of employment in industry, transport, etc., where labour productivity was comparatively high.

The 1928-40 period was particularly noteworthy for the 52 changing employment structure, as a result of which the social product grew by 35 per cent; similarly it produced a near-35 per cent increase in overall production during the subsequent eighteen years (1940-58). Changes in the employment structure today exert a certain influence on the growth of productivity, although the most impressive shifts have already occurred and their future significance will gradually diminish. During the 1960s, labour productivity was mostly influenced by the changing occupational structure induced by mechanisation and automation, by the sharp decline in unskilled and auxiliary types of work, and by the introduction of new techniques and technology.

Table 14 Average Annual Growth in Labour Productivity: U.S.S.R. and U.S.A. * (per cent) U.S.S.R. U.S.A. 1941-50 6.2 3 1951-60 7.8 2.6 1956-65 5.6 2.6 * National income per worker in material production Sources/ TheU.S.S.R. in Figures, 1965, p. 36; The Economy of the U.S.S.R., 1958, Moscow, 1959 (Russ. ed.). and for subsequent years; Handbook of Basic Economic Statistics, July 1965, pp. 12, 16 and 17.

p The U.S.S.R. has had a considerable advantage over the U.S.A., its chief rival, in increasing its productive capacity. In the U.S.A. higher labour productivity has precipitated multifarious problems due to the restricted possibility of extending production and consumption; a relative surplus of productive capital has accumulated, thereby reducing the stimulus for capital accumulation. By contrast, there is practically no limit to increasing production and consumption in the U.S.S.R.; as a result capital accumulation has grown and has guaranteed additional sources for higher labour productivity and accelerated growth rates.

Thus, growth in capital investment in the Soviet economy has accelerated capital accumulation and implied faster 53 growth rates, while the limited growth of capital investment in the U.S. economy has kept the rate of economic development comparatively low. This inter-relationship is evident from the following table.

Table 15 Average Annual Rate of Growth of National Income and Capital Investment in the Soviet and U.S. Economies (per cent) U.S.S.R. U.S.A. Gross capital investment National income Gross capital investment National income 1941-50 7.4 7.0 5.5 5.5 1951-55 11.3 11.3 3.7 3.9 1956-60 1961-65 14.2 6.2 9.1 6.3 insignif. 6.0 2.3 4.6 Sources: The Economy of the U.S.S.R., 19BS, pp. 617-19; The U.S.S.R. in Figures, 1965, p. 36; L. I. Nesterov, Capital Investment of the U.S.S.R. and the U.S.A., Moscow, 1965, p. 181 (Russ. ed.); Statistical Abstract of the United States, 1966, p. 322.

p In the Soviet Union, the average rate of growth of capital investment in production and the national income growth rate for 1928-65 were considerably higher than those in the United States. This is convincing evidence of the dynamic process of capital accumulation in the U.S.S.R. for the purpose of boosting the country’s productive forces. There is the closest relationship between the capital accumulation growth rate and increased national income. The superiority in capital investment growth rate has ensured the Soviet Union a relatively higher national income growth rate than that of the United States.

p Since the last war, the investment pattern has changed markedly in the direction of a greater proportion of more active elements of fixed production assets. Thus, between 1940 and 1965 the share of expenditure on machinery and plant in the capital investment of state and co-operative organisations increased from 15 to 34 per cent.

On the whole, growth in fixed assets in the Soviet economy has been occurring about four times faster than in the United 54 States; growth in the fixed assets of Soviet industry is 10-15 times faster than the corresponding U.S. growth rate. In the long term, Soviet superiority in the rate of capital accumulation has a decisive effect on the potential economic opportunities for growth, while the U.S. social system restricts the opportunities for increasing the rate of capital accumulation. Furthermore, the level of capital accumulation also depends on the extent to which production is effective. The more effective it is, the less capital investment it requires, other conditions being equal, per unit of growth of national income. At the present juncture of the economic competition, increased effectiveness of production is becoming as important as quantitative growth.